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Can bodies corporate ban Airbnb?

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This article was republished with the permission of HWL Ebsworth Lawyers

Redman v The Proprietors – Fairway Island GTP 107328 [2020] QDC 68

A recent decision of the District Court at Brisbane could have significant consequences for Bodies Corporate and unit owners in Queensland alike in respect of short term letting and the use of services like Airbnb. 

On 18 October 2019, the Magistrates Court at Southport approved a by-law that allowed a scheme to prohibit short term letting. At the time, that decision was largely confined to schemes established and governed by the Building Units and Group Titles Act 1980, meaning it applied to about 1% of all schemes in Queensland. 

That decision was appealed to the District Court at Brisbane. The District Court’s decision, properly applied, could now mean that all schemes can prohibit short term letting, including those established and governed by the Body Corporate and Community Management Act 1997 (the other 99%).

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Fairway Island, Hope Island

Fairway Island is a gated residential scheme located in the Hope Island Resort area of the Gold Coast.

Gary Redman and Andrew Murray owned or part owned two lots at Fairway Island. They rented their lots for an average of one week at a time and generated considerable income as a result. Neither Redman nor Murray ever used Airbnb, instead renting through a local real estate agent.

On 10 August 2018, Fairway Island created a by-law that prohibited lot owners from renting their lots for less than one month, meaning that neither Redman nor Murray could continue using their lots for short term letting.

Redman and Murray challenged the by-law before a Referee, and won.

Fairway Island appealed to the Magistrates Court at Southport, and had the Referee’s decision overturned.

Redman and Murray appealed to the District Court, and lost. As such, Fairway Island can prohibit them from renting their lots for less than one month.

The Legislation

The rules that apply to schemes established and governed by the Building Units and Group Titles Act 1980 (BUGTA) are different to those established and governed by the Body Corporate and Community Management Act 1997 (BCCMA).

BUGTA schemes account for about 1% of all schemes in Queensland. Fairway Island is a BUGTA scheme meaning, on the face of it, the decision of the District Court should have little impact on schemes established and governed by the BCCMA.

However, the District Court decision arrives at a number of critical conclusions which, properly applied, could have significant consequences for all schemes in Queensland, including BCCMA schemes.

Holiday letting is not 'Residential Use'

The BCCMA places a number of restrictions what can and cannot be included in by-laws. Significantly, it states that by-laws cannot restrict a type of residential use if that use is lawful and the lot is used for a residential purpose. Short term letting is lawful, and few would probably dispute that it is at least a type residential use when conducted from a residential lot.

The BUTGA contains no equivalent restriction on by-laws, which is why the decision of the Magistrates Court did not apparently apply to BCCMA schemes.

However, the decision of the District Court concludes that short term letting is not residential use at all. The Magistrates Court arrived at a similar conclusion, but not in the same terms as the District Court. The relevant passages of Judge Barlow QC’s decision are below:

“[45] … In its ordinary meaning, to use a building for a residential purpose does not include using it for the purpose of letting it out to others (and those others using it) for holidays or other temporary accommodation.

[46] While the dividing line between holiday or temporary use and a degree of permanence in use as a residence or abode may not be easy to draw, it is open to the body corporate to draw such a line, provided always that it does so for the relevant purpose – in this case, for the use or enjoyment of the lots and the common property. There is some element of discretion in choosing one month, or any other criterion, as the line (indeed, the period of one month itself is flexible, as different months last between 28 and 31 days). But, provided that it is not drawn capriciously, a by-law may draw such a line for the proper purposes of a body corporate and its members.”

In other words, the restrictions on by-laws that apply to BCCMA schemes simply do not apply to short term letting because it is neither residential use nor use for a residential purpose, despite being lawful.

Final comments

We predict that the decision of the District Court will open the floodgates for schemes throughout Queensland to prohibit short term letting, regardless of whether they are a BUGTA scheme or a BCCMA scheme. For some schemes, this will no doubt be a good thing, particularly if they are regularly affected by short term lettings that are used as party venues.

But keep this in mind: nether Redman nor Murray used their lots for party houses. They never used Airbnb. They bought very expensive lots, and used local real estate agents to let them, thereby supporting local business. What will it mean for the value of their lots now that they cannot be let for less than one month? What will it mean for holiday makers that want to visit Hope Island and support the local economy? What will it mean for lot owners who, like Redman and Murray, rely upon rental income from short term letting, if Bodies Corporate subsequently prohibit that use?

The effects of this decision will be far reaching, and only time will tell whether unit owners, schemes and local communities are better or worse off in the long run.

This article was written by Mario Esera, Partner – HWL Ebsworth Lawyers

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